RAHUL AGRO CHEMICALS,PILIBHIT vs. INCOME TAX OFFICER 2(5), PILIBHIT

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.723/LKW/2025 Assessment Year: 2017-18 Rahul Agro Chemicals v. Income Tax Officer 2(5) Madhotanda Road Pilibhit - 2 Puranpur Pilibhit (U.P) TAN/PAN:AAHFR7127E (Applicant) (Respondent) Applicant by: Shri Rakesh Garg, Advocate Respondent by: Shri R.R.N. Shukla, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 27.08.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.

2.0 The brief facts of the case are that the assessee had not filed the return of income for the year under consideration. The Income Tax Department was in possession of information that the assessee had deposited cash totaling to Rs.17,00,000/- in its Bank Account No.06970400000950 maintained with Bank of Baroda, Madhotanda Road, Puranpur, Pilibhit during the demonetization period, i.e. from 09.11.2016 to 30.12.2016. The Assessing Officer (AO) issued Notice under section 142(1) of the Income Tax Act, 1961 (hereinafter called 'the Act’) on 22.01.2018, calling upon the assessee to prepare a true and correct return of

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income for the year under consideration. There was no response from the side of the assessee to this Notice. Since there was no response by the assessee to the statutory Notices issued by the AO, the AO obtained the Bank Statement and other details from the Bank of Baroda under section 133(6) of the Act. From the details obtained from the Bank, the AO noticed that the assessee had made cash deposits of Rs.17,00,000/- in Specified Bank Notes (SBN) during the demonetization period and Rs.13,20,000/- during other period, totaling to Rs.30,20,000/-. The AO further noticed that the out of the total cash deposits of Rs.30,20,000/-, cash deposits to the tune of Rs.15,46,000/- were from sale of properties. However, for the balance amount of Rs.14,74,000/-, the assessee had not filed any documentary evidence to prove the source of cash deposits. The AO, therefore, treated Rs.14,74,000/- as assessee’s unexplained cash credit and added the same to the total income of the assessee under section 68 of the Act. The AO completed the assessment under section 144 of the Act, assessing the total income of the assessee at Rs.14,74,000/-.

2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 271AAC and 271F of the Act, separately.

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2.2 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee and confirmed the order of the AO.

2.3 Now the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

1.The The Learned Commissioner of Income Tax(Appeals) at National Faceless Appeal Centre has erred in law and facts in confirming and addition of Rs.1474000 made by the Assessing Officer with total disregard to the facts and circumstances of the case. 2. The Learned Commissioner of Income Tax(Appeals) at National Faceless Appeal Centre further erred in not appreciating the fact that the sum of Rs.1474000 was out of recovery of old debtors which cannot be added u/s 68 of the Act. 3. The entire Assessment order framed by the AO is illegal. 4. The assessee reserve's its right to add, amend, alter of delete any ground of appeal at the time of hearing. 3.0 At the outset, the Ld. Authorized Representative for the assessee (Ld. A.R.) drew my attention to the application for admission of Additional Ground. It was submitted that the Additional Ground being sought to be admitted was essentially a legal ground which went to the very root of the matter and was

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germane to the entire assessment proceedings. For a ready reference, this Ground is being reproduced hereunder:

5.0 Per contra, the Ld. Sr. D.R. submitted that the issue of notice having been issued beyond the period of limitation was never raised by the assessee before either of the authorities below and, therefore, raising this ground before the Tribunal should not be permitted. The Ld. Sr. D.R. submitted that the Additional Ground raised by the assessee should not be admitted and he prayed that the appeal of the assessee be dismissed.

6.0 After having heard both the parties, it is my considered view that this Additional Ground being sought to be admitted by the Ld. A.R. is purely a legal ground and irrespective of the fact that this ground was not raised before the authorities below, the valuable right of the assessee to raise this purely legal ground cannot be taken away and, therefore, I admit the same for the purpose of adjudication.

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7.0 The Ld. A.R. drew my attention to copy of Circular No.225/363/2017-ITA-II dated 15.11.2017 issued by the CBDT and submitted that as per this Circular, the Notice under section 142(1) of the Act in this case should have been issued by 31.12.2017 but the same was issued on 22.01.2018, i.e., beyond the prescribed period of limitation and, therefore, the assumption of jurisdiction by issuance of an invalid Notice had invalidated the entire assessment proceedings. The Ld. A.R. prayed that in view of the binding nature of the CBDT Circular, the assessment deserved to be quashed.

8.0 Per contra, the Ld. Sr. D.R. placed reliance on the orders of both the lower authorities.

9.0 I have heard the rival submissions and have also perused the material on record. It is seen that in the case of Subhash Chandra Dixit vs. The Income Tax Officer, Lakhimpur Kheri-2 in ITA No.686/LKW/2024 for assessment year 2017-18, this Bench of the Tribunal has dealt with an identical issue and vide order dated 23.01.2026 has decided the appeal in favour of the assessee. For ready reference, the relevant portion of the order of the Tribunal in the case of Subhash Chandra Dixit vs. The Income Tax Officer, Lakhimpur Kheri-2 (supra), vide dated 23.01.2026, is reproduced hereunder:

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“5.0 I have heard the rival submissions and have also perused the material on record. As referred to by the Ld. A.R., in both the cases, i.e., Smt. Suraiya Begum vs. The Income Tax Officer, Ward 1(3)(4) [ Now Ward 1(3)(5), Kanpur (supra) and Anis Ahmad vs. the Income Tax Officer, Ward 1(3)(1), Kanpur (supra), this Bench of the Tribunal has dealt with an identical issue and has decided the appeals in favour of the assessees. For ready reference, the relevant portion of the order of the Tribunal in the case of Smt. Suraiya Begum vs. The Income Tax Officer, Ward 1(3)(4) [ Now Ward 1(3)(5), Kanpur (supra), vide dated 19.09.2025, is reproduced hereunder: “5.0 I have heard the rival submissions and have also perused the material on record. The Ld. A.R. has drawn attention to letter F No.225/363/2017-ITA.II dated 15.11.2017 and it will be relevant, at this juncture, to reproduce the contents of the above said letter:

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5.1 A perusal of the last paragraph, i.e., paragraph 4 in the above said letter, specifically lays down that the process of service of notice under section 142(1) of the Act should be completed by 31.12.2017. A perusal of the assessment order itself shows that the notice under section 142(1) of the Act in the case of the present assessee was issued on 09.03.2018 and, therefore, undisputedly, the statutory notice under section 142(1) of the Act has been issued beyond the date prescribed and, as such, the Instruction of the Department being binding on the Revenue Authorities, the issuance of notice beyond the prescribed date makes the proceedings itself void ab initio. Accordingly, I am of the considered view that in the present case the assessment proceedings deserve to be quashed. Accordingly, the assessment proceedings are hereby quashed, as notice under section 142(1) of the Act was issued beyond the prescribed limit.” 5.2 Following the above said order dated 19.09.2025 in Smt. Suraiya Begum vs. The Income Tax Officer (supra) and in view of CBDT Circular F No.225/363/2017-ITA.II dated 15.11.2017, the assessment proceedings in the case of the present assessee are hereby quashed, as notice under section 142(1) of the Act was not issued within the prescribed limit as per the records before me and accordingly, the additional ground raised by the assessee is allowed. 5.3 Since the asseessee has already been granted relief on the additional/legal ground, the original grounds raised by

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the assessee on merits of the case become academic in nature and are being not adjudicated upon.” 9.1 Following the above said order dated 23.01.2026 in the case of Subhash Chandra Dixit vs. The Income Tax Officer, Lakhimpur Kheri-2 (supra), and in view of CBDT Circular F No.225/363/2017-ITA.II dated 15.11.2017, the assessment proceedings in the case of the present assessee are hereby quashed, as notice under section 142(1) of the Act was not issued within the prescribed limit as per the records before me and accordingly, the Additional Ground raised by the assessee is allowed.

9.2 Since the assessee has already been granted relief on the issue of validity of Notice issued under section 142(1) of the Act, the grounds raised by the assessee in support of merits of the case have become of academic interest only and the same are dismissed as such.

10.0 In the final result, the appeal of the assessee stands partly allowed.

Order pronounced in the open Court on 08/05/2026.

Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:08/05/2026 JJ:

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